Thursday, November 01, 2007

Advertisement free tv? Well what's it worth to you?

Sometimes you have a great idea but technology isn't there. Sometimes you have a great idea but the market mindset isn't there. Sometimes you have an idea and're just plain screwed by the competition.

I think I've got an idea that I've been tossing around for a few months that covers all 3.

It started when I was watching the premier episode of Burn Notice earlier this year (yeh I know it's trashy but Fiona his girlfriend is way hot in a "I can handle myself kind of way") so you've probably watched it at some time too :)

The premier episode was sponsored by DirectTV (a satellite tv provider in the USA). It's not a new concept, basically they get some consumer orientated company to sponsor the premier and it's shown in its entirety without advertisements.

The sponsor gets mentioned at the start and finish of the show and pretty much by name for the week before hand each time the premier is mentioned in the 30 second show advertisements.

You've all seen something similar before, but for some reason it got me thinking.

How much did it it cost DirectTV to sponsor Burn Notice for an "Advertisement Free" premier. And what is my time worth to me?

So the question is this;
"What tv do you watch that you would prefer as an advertisement free show and what is that worth to you?"

So here is where the technology part comes in. When watching cable TV everything that you are watching except live TV is pretty much cached into the broadcasters servers.

In addition in the past broadcast headends were limited in the number of individual streams of "on demand" content they could offer. eg not everyone could go and watch on demand content at once. Though this has changed or is pretty close the timeline that 100% of set top boxes can be watching on demand content.

(oh and if you think that cable companies ears won't prick up when they realise this concept would drive up on-demand usage and further increasing their rivalry over satellite tv, then they do).

- how can tv networks capitalise on this?
So I'm watching an episode of House (best show on tv at the moment even if the original ducklings have moved on). And I really like House the opening scenes look great I'm enthralled and happy to settle in and watch for the next 60 minutes (well 45 minutes of content and 15 minutes of advertisements) and then just when it was getting to the good bits the first advertisement comes on ....

- and I think my time is worth more than this....

so I push the magic button on my remote and the set top box gives me a figure (I'm expecting around about 45c - I'll explain the number later) and I click yes.

The commercial stops, it returns to the House episode and I continue watching, for the next 40 minutes of uninterrupted tv content and love every ad free minute. happy with my interaction with House, happy with my interaction with Time Warner and to be honest not even noticing that I just spent 45c.

- So what just happened?

It's simple.
  • By pushing the magic button on my remote it told the set top box that I was moving from broadcast to streaming at that point in time.

  • The set top box told the billing platform to add 45c to my monthly bill.

  • The content servers in the headend then cut out the pre-programmed commercials, delivering only the House video content uninterrupted until the end of the show.

  • At the end of the show the set top box went back to broadcast and returned me to "normal running time", this is important - I cant just watch 3 shows back to back without breaks otherwise the headends would overload and I would cause a rip in the fabric of the time space continuum.

Now I could have just have just hit pause on my DVR, gotten up, walked away for 20 mins, read a book, walked the dog, written a blog post - whatever.

But that's not the way human interactions work. Spontaneous, continuous, one-off content purchases work through the novelty of their immediacy.

That's why it's worth 45c and that's what will make Time Warner more profitable.

- So how did I come up with the figure of 45c
Easy, It's my estimation of three times how much each advertisement earns Time Warner for each subscriber to watch 15 minutes of advertisements.

With each 30 second spot being purchased for X number of dollars and X number of viewers expected to be watching any given show the broadcasters and advertisers can pretty much come up with an expected number of viewers and what the cost per viewer is going to be.

Or in my example I figure it costs the advertiser 1c to reach each viewer for their 30 second spot.

Now this figure is going to vary based on any number of external factors - how's a show rating, what's it up against, how cold/warm is it outside, who's doing well in the world series etc etc. but it's realistic to come up with a fairly accurate number.

Now I'm sure cable companies are going to get greedy, fat and lazy and try and round this figure up to a $1 per show kind of system but that's not what i-Mediacy is about (yeh I know the term is a little web 2.0 but you get the point), it's about replacing the advertisements not implementing PPV for every show - we're bored with ipod purchases, on demand purchases, dvd to own purchases. This is about recognising my time is valuable and allowing me the choice to 'outbid' the advertisers for my time.

- Why multiple of "three" and what benefits are there for advertisers?
So the first outcry from the 'marketers' is this would be terrible, we rely on a certain number of 30 second spots to be available in order to get our message out there. (in fact certain times eg. presidential season, the available slots often tighten and pricing goes up-or goes down in non ratings season).

So here's why the advertisers are going to like the idea. When I select buy, the amount I as the viewer pays is three times what the consumer company paid for the slot, yes they don't get to advertise their product but not only doesn't it cost them nothing to advertise they actually get a rebate equal to the amount of twice what they would have otherwise spent.

So get this, I could spend $200k on a weeks advertising and actually make money back on my investment (eg for the 100,000 people that chose not to watch my commercial i made back twice the amount of money they would have cost me).

- That's the beauty of the novel concept, not only are the advertisement free viewers getting to watch content for a small - unnoticeable in the grand scheme of things fee happy.

- And the advertisers are happy because in certain instances they actually get a refund from the cable networks on the money they might have spent with them.

- The cable networks are happiest of all.

  • They get the original 15c cut that the commercial was going to bring in as revenue.
  • With diminished spot numbers natural market forces will increase the average spend per 30 spot.
  • BUT most importantly with the consumer vendors knowing that there is the strong possibility that their advertisements will be usurped will have a natural tendency to overbid on their 30 second spots. eg trying to outbid the consumer. In doing so the profit point percentages for the cable operators increases substantially.

This increase per 30second spot must be reflected as a multiple in what people pay to watch advertisement free. If the figure is a flat rate they will feel ripped off.

Times have changed, you need to make your content viewing consumers feel valuable - there are too many alternatives out there (and getting more enticing by the day).

By opening the kimono and showing them exactly what you make by them participating and watching your vendors commercials they will feel inclusive and more valued. You may even find some brand loyalty at what a great job the cable company is actually doing.

Well there it is. As far as I can tell from my research it's a novel idea. i-Mediacy is there as a concept and I'd really like to hear your thoughts.

P.S. I've also got another idea about how consumers can make money watching those ads with that magic button....but that's for another time and another venue.


  1. Dean - I ditched my satellite tv provider about 3 months ago. Kids were watching too much TV, and it was, in part, and experiment in deprivation.

    Even though we don't have normal television, our fundamental viewing habits have not changed that much. We are not watching as much, in terms of time spent in front of the laptop(s). I have Windows Media Server and MythTV running at home, and we actually can find and watch pretty much whatever we want...from obscure movies to regular serialized television shows.

    With respect to your original question, I feel that the current forms of advertising that the major networks are using in their online broadcasts is very poorly conceived. With NBC shows like "The Office", you are repeatedly bludgeoned with the same commercial , for the same product, over and over and over again. The result is an engrained hatred of the product, which is obviously not the intended effect.

    Personally, I think there is more than enough product placement in TV and movies these days, that we could do without conventional TV ads altogether. Pretty much any product or service can be worked into the context to a television show or movie.

  2. This idea doesn't work for any of the network or other OTA channels carried by the cable companies, because the advertisers pay the local tv stations or network parents (in the case of national ads), not the cable companies, to carry the ads. So while still theoretically possible, the logistics of obtaining coordination/agreements between all three parties may make the idea impractical.

    Even for cable-only stations, if a company wants to place a national ad on, say, TNT, does the company negotiate with TNT, who negotiates with every cable company, satellite company, fios company which carries TNT, in order to set the ad rate? I don't see how that would work.

  3. The technological side aside.
    Broadcasters may soon realize that I would even pay a fix monthly rate not to have to press the magic button ever.
    When the broadcaster fully embraces this need as their source of income, we are dealing with a simple content-purchase model (or because of the fresriders), a community-sponsored program (like NY Public Radio).

    Your idea is cool cause it allows a model of going from one extreme model to the other flexibly both with time and per-user basis.

    It is also interesting to imagine how advertisers and their reluctant non-viewers will compete and self-stabilize advertising prices. Would be good to hear what folks in the ad business think, after all I am just a geek too.

  4. sounds far too logical for corporations to implement.

    maybe someday...


  5. I personally pay $100 a month for my cable TV. I'm not giving them a cent more - I'll be glad when double dipping is dead and finished. We were stupid to ever let them charge us for access to content AND receive revenue from advertisers. One or the other...

    (Anyway, there's nothing on TV. You said it yourself.) Of the 15% shift of eyeballs to Internet, only 3% of advertising has moved. Why come up with the new models for the loss leaders, print and tv?

  6. Dean, take that post down. you're going to give the greedy cable execs ideas that they can have pop-ups on tv: 'pay $.45 to remove this pop-up'.

    Andrew Close

  7. you are missing, as noted, the actual income streams for the node points. The service, if implemented, would also have a backlash factor--think slot machines and addictions. it makes, imho far more sense to work for increasing the sense of control an end user has over content, leaving him with time management back as a "free" service he already has.